FALCON POWERS – Climate risks such as wildfires, hurricanes, and natural disasters are becoming increasingly important factors in determining prices in oil markets, as the world continues to grapple with the difficulty of moving away from fossil fuels.
The recent Hurricane Bree, one of the latest extreme weather events, raised market concerns that manifested in rising crude oil prices as it approached Texas in early July. According to the U.S. Energy Agency, Texas accounted for 42% of total U.S. crude oil production in 2022, and hosts the largest number of crude oil refineries nationwide.
Han Tan, an analyst at Exinity, states in response to AFP questions that “about half of the total U.S. oil refining capacity is located along the Gulf Coast.” This is enough to drive prices up, as investors worry about potential supply disruptions.
Tan explains that “the markets fear that Hurricane Bree may just be a prelude to what could be a storm-heavy season this year.”
This comes as the World Meteorological Organization warned that Bree’s early arrival and rapid intensification could signal the nature of storms in the coming years.
The wildfires in Canada witnessed in May had also pushed up crude oil prices, as they threatened the Fort McMurray area, known as the nerve center of Canadian oil production. Jorge León, an analyst at Rystad Energy, says that climate change is now “a major source of risk for oil markets,” expecting it to “escalate in the coming years… becoming more evident and more extreme.”
